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Chapeau! The Swiss National Bank had today proven what many had either suspected or known but nobody has dared to talk about, namely that the days when central banks couldn’t challenge hedge funds are over. While the Eurozone’s indecisive and incompetent political leaders are still looking for a hedge fund conspiracy under every desk, the chaps at the SNB have acted.

Had all this happened a few years back, the SNB would now be standing there with a bloody nose and some hedgie would have made his annual P&L in a morning. But it is clear that the appetite to take on a central bank is no longer there.

Altogether, we have been watching the power of hedge funds gradually diminish over the past couple of years and what we see today is in some ways the invitation to the funeral. That is not to say that they are “gonzo” but it does mean that the authorities will not have to legislate specifically against them. What we are experiencing is a creeping reversion to markets as they were up until the late 1980s when hedge funds made good money for their clients but when it would never have dawned on anyone that they might be in a position to push governments around. Look at what George Soros did to the Bank of England in 1993.

The SNB certainly caught everyone napping and I would expect that there will a bucket load of red on tonight’s FX P&Ls across the globe.

For now, the Singapore Dollar seems to be the safe haven play but for how long is another matter. However, if what we have seen today is of significance, then the central banks will be taking some sort of control of the forex markets for the first time in at least ten years, perhaps with the notable exception of the Bank of Japan’s intervention after the earthquake and tsunami.

If the leveraged community no longer has either the courage or the cash to challenge the monetary authorities, they might begin to gain more credibility again. Nobody cares how strong you are, so long as you are stronger than your opponents.